UMG/EMI merger

[VAisForEagleLovers]

A proposed merger between these two major labels is getting some press. Comments Don made back in 2001 are quoted in the article twice. It's an interesting read, no matter which side of the issue you're on.

http://www.huffingtonpost.com/2012/09/20/universal-emi-merger_n_1897901.html

[sodascouts]

Gosh, I sure hope this doesn't happen.

[VAisForEagleLovers]

They didn't stop XM and Sirius, they didn't stop NBC Universal and Comcast... I'm with you, Soda, but I'm trying to think of one they did deny lately.

[sodascouts]

They didn't stop Ticketmaster and LiveNation either.

It doesn't look good.

[VAisForEagleLovers]

When I saw you had replied, Soda, I was hoping you'd cheer me up. But instead you've dashed my hopes still further.

[Brooke]

Doesn't sound good.

[Topkat]

Looks like this is going to happen. I read that it has been approved. Universal is buying EMI for I think 1.9 billion$

[sodascouts]

Yes. This mega-label will hold the rights to so much music that they'll be able to demand much higher percentages from sales, which means higher prices for you and me. This will especially impact the digital arena. Any digital providers unwilling ((or unable financially) to go along with UMG/EMI's demands will fold.

A lot of lost money and jobs.... except at the top, where the fatcats get fatter. And when the raised prices lead to fewer sales, they'll tell you that it's all the fault of music pirates and YouTube!

[zeldabjr]

Yes. This mega-label will hold the rights to so much music that they'll be able to demand much higher percentages from sales, which means higher prices for you and me. This will especially impact the digital arena. Any digital providers unwilling ((or unable financially) to go along with UMG/EMI's demands will fold.

A lot of lost money and jobs.... except at the top, where the fatcats get fatter. And when the raised prices lead to fewer sales, they'll tell you that it's all the fault of music pirates and YouTube!

don't mean to be dense, but I never understand all this kind of talk...who do you mean by "digital providers"?...but I do get enough of it to know it's not good:thumbsdown:

[sodascouts]

I'm talking about services which sell music online ("digitally") such as iTunes.

Here is more information: http://www.soundonsound.com/sos/feb04/articles/onlinemusic.htm

The record companies get a cut of the sales of each online song. With the merger, such a massive amount of popular songs will belong to this mega-label that they can negotiate a much larger cut, or else they no longer will allow the music to be available to sell legally online through that service. That will render the service so bereft of popular songs that their sales will plummet. They can't win; either surrender a lot more money to the record companies and lose it that way, or lose money because they are no longer licensed to sell so many popular songs. If they agree, they will almost certainly raise prices to reduce their losses.

It's like if you had a business which sells cookies made by a lot of different bakeries, and you gave those bakeries about 70% of the money you made selling their cookies and keep 30% for yourself as payment for your services. Your store is popular, so they give you their cookies to sell. They make money off what you sell and additionally hope your customers will like those cookies so much they'll go to the original bakery more and increase profits there, too. It works pretty well and you're bringing in some good money.

Then, a company comes and buys up a vast majority of the bakeries that provided you with your many of your best-selling cookies. The company tells you that unless you increase their cut of your cookie sales, they won't let you sell cookies from those bakeries anymore. Perhaps they now demand 90% of the money instead of 70%.

You'll have a much smaller selection of cookies to sell in your store unless you agree. Refusing to agree will hurt your business because people may come into the store looking for their favorite type of cookie and you can no longer sell it. They go elsewhere to find that cookie and don't come back.

If you do agree to the new terms, however, you're making a THIRD of what you used to. You may not be able to afford to maintain your store anymore.

What to do? One solution: Agree to the terms, then raise the prices of the cookies considerably to try and make up the difference. Another solution: lessen the cut that you have been giving the smaller bakeries, the mom-and-pop bakeries, whose cookies aren't as popular. You'll probably wind up doing both.

All around, no one is benefiting except that company.

[VAisForEagleLovers]

I like the cookie analogy, except what when you decide to continue getting cookies from this new company, you need to drive the price up to meet your costs. So people quit buying them because they're too expensive and gas and food are more important. They still want the cookies so they find someone who did buy some and go to their house and make copies of them. See...the cookie analogy breaks down at that! :grin:

The flip side is that it's unlikely that the artists will ever see more money from this deal. When more people go back to pirating instead of buying MP3s the artists will lose out. In addition, there's less competition between these companies which means contracts between music company and artist will slowly begin to go more in favor of the company than the artist. The advertising on things like Spotify and YouTube, etc will go to the labels with little of it going to the artists, because of contracts slowly changing. IMO. In the next few years, it would mean less money for the digital providers and less money for the artists, and more money for the label. For the long term, the labels will start losing money because both artists and fans finally find something else to replace them. And they'll wonder where they went wrong and why it happened.

The future of music will move away even further from a recording and distribution format. As things get more digital, this will happen. Picture a company like Apple not taking this laying down. Nor will Amazon. They'll find a way to contract with artists directly and start cutting out the labels. Private recording studios are everywhere. Even a bigger label like a unified UMG/EMI can't compete with Amazon or Apple, let alone both of them. It very well could be that a UMG/EMI merger will wake a sleeping giant that's best left sleeping. Apple has a history of being at its most innovative when someone tries to back it into a corner.

[Topkat]

The future of music will move away even further from a recording and distribution format. As things get more digital, this will happen. Picture a company like Apple not taking this laying down. Nor will Amazon. They'll find a way to contract with artists directly and start cutting out the labels. Private recording studios are everywhere. Even a bigger label like a unified UMG/EMI can't compete with Amazon or Apple, let alone both of them. It very well could be that a UMG/EMI merger will wake a sleeping giant that's best left sleeping. Apple has a history of being at its most innovative when someone tries to back it into a corner.

I can't see this happening so fast. Artists are under contract with their labels which do the promotion for them. For an artist to make an independent deal with say Apple or ITunes is going to take a lot of legal maneuvering. I guess that could happen down the road, but I wouldn't count the label out. They obviously have the big bucks to fight it.